with Dino Vallarino, General Manager, Cutting Underwater Technologies UK
What was the vision behind the creation of CUT in 2000?
Cutting Underwater Technologies’ (CUT) origins date back to 1981 with the formation of Tecnospamec, a company based in the Northern Italian city of Genoa. The company’s focus on research and development led to the designing of a revolutionary underwater application for the well known diamond wire cutting technology. By 1991, the new concept system, integrated with an ingenious mechanism for the anchoring to the structure to be cut, had been fully developed and patented. This was the birth of the Diamond Wire Cutting Machine (DWCM). In the late 1990s Tecnospamec decided to establish a new company which would be fully dedicated to the exploitation of this new and innovative engineering feat.
Thus in 2000 Cutting Underwater Technologies UK was set up in Aberdeen, with the objective to market and operate the patented technology which had been perfected over nine years time. Such was the success of the Diamond Wire Cutting Machine that, within a few years, CUT UK became the mother company of an organization which had expanded to include a direct presence in the USA, Norway, Singapore, and more recently in Brazil. Each base develops its own geographical market whilst, from the Aberdeen Headquarters operations in Europe (except Norway), the Mediterranean, Africa, the Caspian area and South America, are controlled and supported
What is the scope of products and solutions developed by Tecnospamec and brought to the market through CUT?
By creating CUT to deal directly with all the commercial and operational aspects, the parent company Tecnospamec was free to continue focusing on engineering and R&D in order to continue supplying DWCM products and innovations.
Indeed, Tecnospamec has developed many new techniques over the years using the patented technology, allowing us to have a variety of product lines and over 100 machines in operation globally. They all use the same diamond wire cutting system, but can cut from a very small 4 inch diameter up to 155 inches. There is also the capability to design and build machines for specific projects. This allows us to match machines to our client requirements to a far greater degree than most service companies, thereby maximising tool employment whilst minimising time on site therefore offering a significant reduction in overall costs.
As a company heavily relying on the decommissioning and abandonment activity in the offshore industry, how do you see these markets developing in the UKCS in the coming years?
According to public data issued by the British government, the UKCS is expected to see a sharp increase in the number of decommissioning projects within the next 10 to 15 years. The actual timescales for the decommissioning, especially in the more mature areas such as the North Sea will, to a large extend, be dependant upon the price at which the oil stabilises. Already over the last few years, we have seen projects coming into their operational phase. Meanwhile others are in the planning stages, in preparation for the actual decommissioning phase that may be 2, 3 or more years away.
In 2008 we have been involved in removal works on three platforms in the FRIGG field, TYRA field and are doing preparatory work for the NW HUTTON project with operations scheduled for 2009. In the EKOFISK fields in 2007 CUT was involved in the first decommissioning campaign and will remain active there through the renewals set for 2009.
To what extent are record-high oil prices discouraging companies from carrying out the decommissioning of old infrastructure so as to maximize the current boom?
There is some truth to that, but it is not a big matter of concern to us. We see for example what is happening in Norway, where there is a big impulse in decommissioning work now despite high oil prices, probably due to fiscal incentives. With oil companies reporting record high profits, it just may be a good moment for them to allocate some of those resources to decommissioning and thus save on taxes. In any case, regardless of the oil price what is sure is that decommissioning activity in the North Sea can only grow over the next 10 to 15 years.
Regarding the rest of the world, there is a great deal of activities taking place, not necessarily connected to decommissioning, now in many areas. West Africa in particular is very dynamic, in countries such as Nigeria, Congo, Equatorial Guinea and Angola in deepwater. These operations are organized and managed from the Aberdeen Base. The Gulf of Mexico also remains active, with a combination of platform removals due to planned decommissioning and to hurricane damage. As environmental legislation gets ever stricter throughout the world, the need for decommissioning will also increase in different oil provinces around the globe.
How does CUT reach its target customers and anticipate big opportunities for decommissioning contracts?
Our main clients are the oil companies themselves, and indirectly the big offshore contractors. We approach the oil companies and ultimately they direct their main contractor toward us, in the event that we have not already established contact directly with them. CUT is very active in communicating to our main potential clients the benefits of our system and the innovations that we bring to the market.
However, though you can try to anticipate when some of the major projects will happen, there is always a wide scope of smaller or unexpected projects which we actively pursue and very frequently secure. Not only that, CUT’s machines are also contracted as contingency tools to be kept onboard in case of need during the installation of new structures or pipelines.
Who are CUT’s main competitors and what gives you an edge in the market?
There are other means of cutting besides diamond wire, such as abrasive techniques, but these are less versatile than what CUT has to offer, and in some cases inapplicable. Within the diamond wire technique, we are protected from competition by our patent, though we don’t rely on that fact alone to secure success and continuous growth. We simply strive to be efficient and competitive, offering clients the best possible service according to their needs. However, without doubt, CUT’s biggest advantage is its track record with an excess of 3000 completed cuts over the last 17 years. Nobody else on the market can get near to that.
Are there other sectors or industries than can benefit from using CUT’s products and solutions?
CUT’s technology can also be applied in different industrial settings other than the offshore industry. We have already done work on a refinery in Singapore, and are looking into a similar job at a refinery near London. Moreover, the nuclear industry offers many opportunities to apply CUT’s services and is likely to represent an important new client base in the future.
What is the status of the SubBottom Cutter project of which CUT is a part, and what are your expectations for this breakthrough technology?
Since 2001, CUT has been participating together with parent firm Tecnospamec (main instigator and coordinator), two other companies (Aberdeen and Norway based) and two European universities, in an EU-funded project to develop a sub-bottom cutter system applying our patented diamond wire cutting technology. The overall cost exceeds 1.6 million pounds, and in addition a participating support of 320 thousand pounds was provided by major oil companies BP, Shell, Amerada Hess and Total. The development and engineering was completed in 2003 and the system was successfully tested, under DNV supervision, in waters offshore Norway.
However, it was perhaps a little too early for the industry as the response was not what was expected. But now there are real needs, driven by new legislation, for a technology capable of cutting structures below the seabed which minimises soil disturbance. The technology is there and has been tested, and the engineering phase is also well advanced. Currently a larger SBC is ready for production once a firm commitment as to use is secured.
What kind of growth is CUT experiencing in terms of its business and the operations in Aberdeen?
2007 was a very good year and 2008 has produced excellent results as well with most of the full year targets already reached. Looking at 2009, based on the work already secured, the growth is set to continue at the same pace.
Such is the demand for our products and services that we have outgrown our current workshop and office facilities. Therefore we are in the process of building a new Headquarters, still in Aberdeen, which will quadruple office space and multiply the workshop area by a factor of 10. The purpose-built facilities are set to be delivered in February 2009. We are anticipating even higher growth in the future both in the offshore and onshore industries, and will therefore be better prepared to accommodate increasing demands. In addition, the new building will give us the opportunity to dedicate space to R&D in Aberdeen, as for the moment those activities are completely concentrated in Italy.
You have a long personal track record in Aberdeen and the oil and gas industry. What keeps you motivated today from your position at CUT?
I was actually ready to retire and thought my working days were over, but two years ago the founders of CUT offered me this job and I ended up coming back to the industry. I have been around Aberdeen since the first fields were discovered in the North Sea in the 1960s, so it is incredible to think that I am living to see that some of the platforms which were installed at that time are being decommissioned today.
What is your final message to the readers of Oil & Gas Financial Journal about CUT?
The future looks very bright for CUT, both in the offshore and onshore businesses. My message to the readers is that hopefully in the near future CUT will be a name familiar to everyone in the oil and gas industry.